INTRODUCTION TO FINANCIAL RATIOS Financial health & operational efficiency are often the key indicators for investors to judge on how an organization is going to perform in future. Analysts keep…

INTRODUCTION TO ADJUSTING ENTRIES Adjusting entries are the additional journal entries made in the system to improve the accuracy of the financial statements. These entries are recorded in the system…

REVERSING ADJUSTMENT ENTRIES Accrual type adjusting entries (Accrued revenues & expenses) are the additional journal entries reported in the system to capture transactions that has occurred but the company has…

DEFERRED REVENUES Under the accrual method of accounting, the amounts received in advance of being earned must be deferred to a liability account until they are earned. Unearned Revenues (or…

OPERATING CYCLE Operating cycle for an organization is defined as the average time duration which it takes to bring back capital invested in its business operations to its cash accounts.…

WORKING CAPITAL DEFINITION & EXAMPLE Working capital is a good indicator of the company’s short term financial health. It gives a fair idea of company’s liquidity & operational efficiency. Some…

LIQUIDITY Liquidity is having cash & equivalents on-hand to pay company’s obligations when they are due. It can also be understood as the company’s ability to convert its current assets…